When The Headlines Said: Charlie Schwab Breaks The Bank

The Monte Carlo capers of U. S. Steel’s new president outraged Andy Carnegie but never ruffled J. P. Morgan

On the thirteenth of January, 1902, William E. Dodge, a large stockholder in the United States Steel Corporation, was reading his copy of the New York Sun in his comfortable Madison Avenue residence. No event of unusual importance dominated the staid Sun’s front page, but Mr. Dodge found a small item in the right-hand column that stirred him deeply. Beneath the headline, SCHWAB BREAKS THE BANK, the story ran as follows:

Monte Carlo, Jan. 12.—Charles M. Schwab, President of the United State’s Steel Corporation, who has been playing roulette very high here during the past few days, broke the bank this afternoon. He had backed 26 plain and in various ways in maximums had won 50,000 francs. He left the table amid great excitement and a large crowd followed him.

He resumed playing later on another table and lost 15,000 francs on five successive coups. He then resumed his practice of backing a certain number and the contiguous numbers on the cloth to the extent of 1,000, 2,000 or 3,000 francs. He lost every time and his winnings nearly vanished.

Although Mr. Schwab had occasional runs of luck late in the afternoon in addition to his recent winning of 75,000 francs on two successive coups, he has already dropped several thousand dollars.

To Dodge, this brief narrative threatened disaster. The giant United States Steel Corporation, capitalized at 1,400,000,000, was less than one year old. Its creation by the mighty banker J. Pierpont Morgan, who brought together the tremendous holdings in ore, blast furnaces, mills, and transportation of Andrew Carnegie, John W. “Bet a Million” Gates, John D. Rockefeller and other tycoons, had been accompanied by serious misgivings and much criticism. Its promise of expansion, order, and efficiency in the vitally important steel industry had yet to be made good. Meanwhile, the monopolistic nature of the company was apparent to every observer; its policies and its very existence were being challenged in the courts. The new corporation was plainly on its good behavior before the public. Should the public form the impression that the president of the corporation was a reckless gambler, the future of what Dodge called “the largest Experiment of Co-operation and Consolidation ever attempted” might be imperiled. That very day Dodge wrote an indignant letter to the chairman of the corporation’s finance committee, George W. Perkins, who represented the interests of the House of Morgan. “I have no right to criticize [Schwab’s] habits or pleasures,” Dodge wrote, “but as the President of the U.S. Steel Corporation the fact that he plays ‘roulette very high’ and sees no harm in it absolutely changes the view the public has had of his caution, care & business methods. A loss of twenty millions of dollars would have been nothing to this.”

At this time President Schwab was blissfully unaware of the excitement he was causing in his native land. He was not to remain so for very long. The next day the Sun carried another account of his exploits.

Monte Carlo, Jan. 13.—C. M. Schwab, President of the United States Steel Corporation, who has been playing roulette here for high stakes for several days and who broke the bank yesterday afternoon, repeated this performance ten minutes before the rooms closed last night. He won 54,000 francs on No. 20, which he backed in various ways on maximums.

The Casino was thronged at the time and Mr. Schwab’s feat was greeted with cheers.

Previous to this Mr. Schwab had lost many thousands of francs on the same number. Mr. Schwab won three maximums today in fifteen minutes.

Other papers also carried the story. The World had him winning heavily on No. 36 while onlookers stood on chairs and cheered, but reported that in the end he lost $20,000 on his evening’s play. The more restrained New York Times reprinted the Sun’s earlier dispatch, and ran in addition an ominous editorial. “A man who is at the head of a corporation with more than a billion dollars of capital stock, which controls a great part of one of the chief industries of a great Nation, and of which the securities are offered to the public as a sale and profitable investment, is under obligation to take some thought of his responsibilities,” the editorial ran. ”We should suppose that the friends of Mr. Schwab would call these strange stories to his attention in order that lie may deny them if he is in a position to say that they are untrue.”